New TAX REBATE Eligibility FY 2018-19 with Examples | Are You Eligible to Save Income Tax? | FinCalC [VIDEO]

Few months are remaining before the end of Financial Year 2018-19 and you guys must be finding ways to reduce your Income Tax.

If you are not aware about the Tax Rebate under SECTION 87A, then it is the right time to know about Deduction under SECTION 87A called as Tax Rebate.

Find out if you are eligible to save Income Tax using Tax Rebate under SECTION 87A.

WATCH VIDEO:

Tax Rebate under SECTION 87A

We have something called as Tax Rebate which was introduced to reduce the Income Tax burden from people falling in lower Tax Slabs.

You can avail a maximum of Rs.2,500 as Deduction under SECTION 87A as Tax Rebate, but there is a condition for it's eligibility:

Tax Rebate of Rs.2,500 is applicable for FY 2018-19, only if your Taxable Income is less than or equal to Rs.3,50,000.

So your Taxable Income need to be less than or equal to Rs.3,50,000 for you to avail this benefit of Tax Rebate and save Income Tax.

How this Tax Rebate Works

First, you need to calculate your Taxable Income in a Financial Year.

Your Taxable Income is calculated as:

Taxable Income = Gross Income - Rs.40,000 - Investments 

where,
- Gross Income is the Total Income in a Financial Year
- Rs.40,000 is the Standard Deduction applicable for Employees and Pensioners
- Investments are the Investments made by you in the Financial Year

After you calculate your Taxable Income, you need to calculate Income Tax on your Taxable Income based on Slab rates.

For example, if your Taxable Income is Rs.3,50,000, your Income Tax is calculated as:

Income Tax = 5% of Rs.3,50,000 - Rs.2,50,000 

Income Tax = 5% of Rs.1,00,000  

Income Tax = Rs.5,000

For Income Tax Calculation and Tax Slabs: WATCH THIS

Since Taxable Income is less than or equal to Rs.3,50,000, Tax Rebate of maximum Rs.2,500 is applicable on calculated Income Tax which makes it equal to:

Income Tax = Rs.5,000 - Rs.2,500
Income Tax = Rs.2,500

4% cess is calculated and added which makes the Total Income Tax:
Income Tax = Rs.2,500 + 4% of Rs.2,500
Income Tax = Rs.2,600

This way, Tax Rebate of maximum Rs.2,500 is applicable only when your Taxable Income is less than or equal to Rs.3,50,000.

Try to get your Taxable Income to less than or equal to Rs.3,50,000 by investing in various Tax Deduction schemes before the end of Financial Year.

Watch the above embedded video to see another example where Tax Rebate is not applicable.

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